Antitrust laws — statutes that supposedly keep any one firm or group of firms from dominating the marketplace — are thought by some to be the bulwark of free enterprise. These laws are founded on the idea that without the continued vig
ilance of the government, large corporations would ruthlessly destroy their smaller rivals and then raise prices and profits at consumers` expense. But antitrust has a dark side; it often is used to the detriment of the consumers it`s supposed to protect.
In theory, antitrust laws should prevent anticompetitive mergers that harm the public interest, but in practice, they are often misused to obstruct competition. In fact, in several instances they end up harming the very companies they were supposed to protect
. Collectively, such laws not only have a negative effect on economic efficiency, but also negatively affect the appropriate distribution of wealth and income in society and the allocation of political and consumer power and rights.
Often, antitrust laws are fluid, non-objective and retroactive. Because of murky statutes and conflicting case law, companies can never be sure what constitutes permissible behavior. Normal business practices — price discounts, product improvements and exclusive contracting — can somehow morph into an antitrust violation when examined by government antitrust regulators. Companies can be accused of monopolistic price gouging for charging more than their competitors, or accused of predatory pricing for charging less, or accused of collusion for charging the same.
In one of the most brazen examples of misuse of antitrust laws for competitive and strategic benefit, Digital Equipment Corp. filed a lawsuit against Intel in 1990, when the firm`s attempt to persuade Intel to incorporate Digital Equipment`s technology as part of its next-generation chip design ended in failure. Alpha, then Digital`s flagship product, was at the time the fastest chip in the industry. In spite of Alpha`s relative superiority, more computers, including computers manufactured by Digital itself, employed Intel`s lower-powered Pentium chip than Digital`s counterpart. In 1997, Digital threatened Intel with antitrust action in a bold attempt to reposition itself in the computer industry. Robert B. Palmer, Digital`s chief executive, denied analysts` suggestions that the lawsuit was in fact a veiled strategic effort to prevent Intel from developing competing technology in the microprocessor market.